Alternative Technical Efficiency Measures: Skew, Bias, and Scale

Author(s)/Creator(s)

William Clinton Horrace, Syracuse University. Center for Policy ResearchFollow
Qu Feng, Nanyang Technological University, Division of Economics.

Description/Abstract

In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.

Document Type

Working Paper

Date

2010

Keywords

Stochastic frontier model, relative efficiency measure, two-sided measure, bias, bootstrap confidence intervals

Language

English

Series

Working Papers Series

Disciplines

Mathematics

Additional Information

Working paper no. 121

Harvest from RePEc at http://repec.org

Recommended Citation

Horrace, William Clinton and Feng, Qu, "Alternative Technical Efficiency Measures: Skew, Bias, and Scale" (2010). Center for Policy Research. 45.
https://surface.syr.edu/cpr/45

Source

Metadata from RePEc

Creative Commons License

This work is licensed under a Creative Commons Attribution 3.0 License.